emma jones company has the following information available:\naccount 12/31/2023 12/31/2022\naccounts payable…

emma jones company has the following information available:\naccount 12/31/2023 12/31/2022\naccounts payable $76,500 $80,000\naccounts receivable, net 42,300 49,000\ncash and cash equivalents 43,700 70,000\ninventories 100,000 99,000\nlong - term investments 20,000 100,000\nshort - term investments 27,000 44,000\nincome taxes payable 2,000 5,000\nlong - term notes payable 20,000 30,000\ndid the quick ratio improve from 2022 to 2023?\na. no.\nb. yes.\nc. it stayed the same.\nd. there is not enough information.

emma jones company has the following information available:\naccount 12/31/2023 12/31/2022\naccounts payable $76,500 $80,000\naccounts receivable, net 42,300 49,000\ncash and cash equivalents 43,700 70,000\ninventories 100,000 99,000\nlong - term investments 20,000 100,000\nshort - term investments 27,000 44,000\nincome taxes payable 2,000 5,000\nlong - term notes payable 20,000 30,000\ndid the quick ratio improve from 2022 to 2023?\na. no.\nb. yes.\nc. it stayed the same.\nd. there is not enough information.

Answer

Explanation:

Step1: Recall Quick Ratio Formula

The quick ratio is calculated as $\frac{\text{Quick Assets}}{\text{Current Liabilities}}$, where quick assets are cash, cash equivalents, short - term investments, and accounts receivable (net). Current liabilities are accounts payable, income taxes payable (and other short - term liabilities, but here we have accounts payable and income taxes payable).

Step2: Calculate Quick Assets for 2022

Quick Assets (2022) = Cash and Cash Equivalents (2022) + Short - Term Investments (2022) + Accounts Receivable, net (2022) = $70,000 + 44,000+49,000$ = $70000 + 44000+49000=163,000$

Step3: Calculate Current Liabilities for 2022

Current Liabilities (2022) = Accounts Payable (2022) + Income Taxes Payable (2022) = $80,000 + 5,000=85,000$

Step4: Calculate Quick Ratio for 2022

Quick Ratio (2022)=$\frac{163,000}{85,000}\approx1.9176$

Step5: Calculate Quick Assets for 2023

Quick Assets (2023) = Cash and Cash Equivalents (2023) + Short - Term Investments (2023) + Accounts Receivable, net (2023) = $43,700+27,000 + 42,300$ = $43700+27000 + 42300 = 113,000$

Step6: Calculate Current Liabilities for 2023

Current Liabilities (2023) = Accounts Payable (2023) + Income Taxes Payable (2023) = $76,500+2,000 = 78,500$

Step7: Calculate Quick Ratio for 2023

Quick Ratio (2023)=$\frac{113,000}{78,500}\approx1.4395$

Step8: Compare the Ratios

Since $1.4395<1.9176$, the quick ratio decreased from 2022 to 2023, so it did not improve.

Answer:

A. No.